Southern Steel Sheet Co. Ltd.

Current situation: the enterprise has not yet established the documents for proving the purchase price of input black sheet materials from the associate party; not yet determined whether the profit margin sold to associate parties is appropriate for independent parties; the interest expense has not been determined beyond 20% of Ebitda as per Decree 20/2017. This is an issue of potentially hidden risks, which may result in increasing tax expenses upon any inspection conducted by the tax authorities.

The price determination in associate transactions failed to comply with regulations, leading to the possibility of tax imposition.

TPM stated the necessity to standardize the accounting process, determine the cost of raw materials, allocate delivery costs, taxes (non-refundable), and make an adjustment to eliminate differences in purchasing policies for each material code. Thereby determining the purchase price for each material (ensure the elimination of difference factors) to use as a basis for price comparison of each raw material purchased from the associated party and the independent party.

For the sales revenue from associate parties, the enterprise shall calculate and allocate cost of goods sold, sales and management for each client, as a basis for determining the profit sale rate for each client. Therefore, it shall be used to determine the profit margin sold to the associate party which is completely within the standard profit margin of the independent party.

TPM advised the company to use its own internal transaction data to prove the material purchased price from associate parties was definitely in compliance with the standard independent trading price range of independent objects and currently trading company.